December 8, 2005

 

CBOT Soy Review on Wednesday: Sags on fundamental, technical pressure

 

 

Soybean futures at the Chicago Board of Trade ended lower Wednesday, extending their retracement of prior gains, with technical weakness and bearish underlying fundamentals keeping buyers on the run.

 

January soybeans finished 5 cents lower at US$5.59, January soymeal settled US$1.50 lower at US$173.30 a short tonne, while January soyoil ended 14 points lower at 21.19 cents a pound.

 

The market extended the week's defensive stance, sliding to one-week lows, with the ability of futures to penetrate technical support and a lack of supportive features attracting speculative sellers, analysts said.

 

Prices backpedaled from the outset, with futures briefly descending to double-digit losses, as speculative selling pressure accelerated once pre-placed sell-stop orders were activated. Satisfactory crop conditions in South America, ample U.S. inventories, a lagging export pace and a higher-than- expected Canadian canola crop estimate served as the fundamental sparks to keep prices pinned in negative territory.

 

The rolling of January contracts into deferred months kept spreads active, with the January/March spread widening by 1 cent per bushel.

 

Meanwhile, firm cash basis levels amid a lack of country movement remain an underlying supportive feature, but in the face of rising ending stock projections, buyers were unwilling to fight speculative selling pressure, said a CBOT commission house broker.

 

The average of estimates from analysts surveyed by Dow Jones Newswires pegs the 2005-06 U.S. soybean carryout at 386 million bushels, from a range of 337 million to 450 million. U.S. Department of Agriculture is scheduled to release its latest carryout projections in its supply and demand report Friday at 8:30 a.m. EST.

 

On tap for Thursday, USDA will release its weekly export sales report at 8:30 a.m. EST. Analysts surveyed by Dow Jones Newswires anticipate weekly U.S. soybean export sales for the week ended Dec. 1 to fall within a range of 400,000 to 600,000 metric tonnes.

 

DTN Meteorlogix Weather Service said in Brazil's Mato Grosso and Mato Grosso do Sul growing areas, heavy rains of up to three inches or greater fell Tuesday. There is no indication at this time that the rains caused much crop damage, but at this point, the entire South American soybean region from Brazil through Argentina has favorable crop weather conditions.

 

In pit trades, Man Financial, Refco, Citigroup, O'Connor, Prudential Financial, RJ O'Brien and Shatkin/Arbor were featured sellers. Commodity funds were estimated sellers of 2,500 contracts. Tenco spread 1,500 March/January and Refco spread 1,000 January/March.

 

South American soybean futures ended lower. The March futures settled 5 1/2 cents lower at US$5.98 1/2.

 

 

SOY PRODUCTS

 

Soymeal futures ended lower across the board, in step with the defensive tonnee in soybeans. Technically inspired speculative selling weighed on prices also, as active futures penetrated meaningful support at their respective 50-day moving averages, traders said.

 

Soyoil futures ended down, but well off earlier lows. Technical selling coupled with bearish fundamentals set the stage for the declines, as prices briefly sank to nearly 10-month lows before finding support.

 

Commercial buying was an underpinning featured, while larger-than-expected Canola crop estimate and large domestic inventories kept speculative sales attractive.

 

January oil share finished at 37.94%, and the January crush was at 55 1/4 cents.

 

Meanwhile, soymeal commitments are expected in a range of 75,000 to 125,000 tonnes, and soyoil sales are seen in a range of 3,000 to 8,000 tonnes in Thursday's USDA weekly export sales report.

 

In soymeal trades, Fimat and Rand Financial were key sellers, with commodity funds estimated sellers of 1,000 contracts.

 

In soyoil trades, ADM Investor Services, Bunge Chicago, Cargill and Term Commodities were featured buyers. Fimat, Man Financial, Prudential Financial and RJ O'Brien were key sellers on the day. Commercials were net buyers and speculative funds were estimated sellers of 2,000 lots.